United States District Court, D. Oregon
OPINION AND ORDER
Aiken United States District Judge
Ronald and Dorothea Joling evaded and failed to pay federal
and state taxes for many years, resulting in criminal
convictions, tax liens against their properties, and this
civil action brought by the United States to reduce its tax
assessments to judgment and foreclose its tax liens against
several parcels of property.
August 31, 2016, this Court entered default judgment in favor
of the United States. The Court also declared that Antioch
Ministries and other unincorporated associations used by the
Jolings to obscure their ownership of property were their
nominees, and that any transfers of property to the nominee
associations were fraudulent with respect to the United
before the Court is the United States' Motion for
Determination of Lien Priority between it and the Oregon
Department of Revenue (DOR), The United States contends that
the federal tax liens against the Jolings* properties are
senior and superior to all state tax liens. DOR disagrees and
maintains that its tax liens became choate as of their
recording dates, and that the priority of liens should be
determined according to the "first in time first in
right" rule. See United States v. McDermott,
507 U.S. 447 (1993). For the reasons explained below, I agree
becomes choate "when the identity of the lienor, the
property subject to the lien, and the amount of the lien are
established." United States v. New Britain, 347
U.S. 81, 84 (1954). The first two requirements are not at
issue; the government does not dispute that the state tax
liens identify the lienor and the amount of the liens.
Rather, the issue is whether DOR's tax liens identify the
property subject to the liens.
2008 through 2014, DOR recorded distraint warrants against
the Jolings in Coos and Linn Counties; the warrants gave DOR
liens against the Jolings' interests in real property
located in those counties. See Or. Rev. Stat.
§§ 205.125(2), 314.430. At the time, however, the
Jolings purportedly had transferred the interests in their
properties to Antioch Ministries. The United States argues
that the state tax liens against properties held by the
Jolings - with no identification of Antioch Ministries as
nominee - failed to identify the property subject to the
liens. As a result, the United States argues that the state
tax liens remained inchoate until the Court ruled that the
Jolings' transfers to Antioch Ministries were fraudulent.
The United States further emphasizes that the federal notices
of tax liens were filed against Antioch Ministries as nominee
for the Jolings, thus identifying the property subject to the
liens; i.e., the properties purportedly transferred to and
held by Antioch Ministries.
responds that Antioch Ministries never filed articles of
incorporation with the Oregon Secretary of State, and, as an
unincorporated association, it was not a legal entity and was
incapable of holding title to real property. DOR emphasizes
that a "purported transfer to a non-existent entity is
void." DOR's Surreply at 2 (citing Klorfme v.
Cole, 121 Or. 76, 252 P. 708 (1927) and Oregon v.
Bureau of Land Mgmt., 876 F, 2d 1419 (9th Cir. 1988)).
DOR thus maintains that the transfers of property to Antioch
Ministries were void, and that the Jolings retained their
interests in the properties when DOR filed its warrants and
perfected its liens.
United States does not dispute the assertion that Antioch
Ministries was unincorporated. Further, it is
well-established that an unincorporated association cannot
hold title to real property. Oregon v. Sunbeam Rebekah
Lodge No. 180, 169 Or. 253, 266, 127 P.2d 726 (1942)
("It is our conclusion that Sunbeam Rebekah Lodge No.
180, an unincorporated association, was incapable of taking
title to or holding the real property here involved.");
see also Next Step v. Redmon, 879 N.W.2d 71, 72
(N.D. 2016) (discussing common law rule that
"unincorporated associations are incapable of holding
title to real property because they are not legal
United States nonetheless relies on United States v.
Ultra Dimensions, 803 F, Supp. 2d 596 (E.D. Tex. 2011)
to support its argument. There, the debtors fraudulently
conveyed property to Ultra Dimensions, a sham trust.
Id. at 597. A judgment creditor filed an Abstract of
Judgment against the debtors, but not Ultra Dimensions, while
the federal government filed notices of tax liens against
Ultra Dimensions as nominee for the debtors. Id. at
598. The district court ruled that the judgment lien did not
become choate until the court voided the fraudulent transfers
to Ultra Dimensions, and it was subordinate to the federal
tax liens as a result. Id. at 600-01. The United
States argues that the same analysis should apply in this
case. I disagree.
Ultra Dimensions, court specifically noted that
"Ultra Dimensions, not the [debtors], held title to the
Subject Property at the time the Abstract of Judgment was
filed." Id. at 600. Here, Antioch Ministries
was legally incapable of holding title to real property, and
it could not and did not hold title to any property at the
time DOR filed the warrants. Thus, the transfers to Antioch
Ministries were void and not simply voidable after the fact.
See Klorfine, 121 Or. at 81-84, 252 P. 708 (holding
that a debtor's attempted transfer of deed to a dissolved
corporation was void, and that a lien against the debtor
nonetheless attached to the property); Oregon v. Bureau
of Land Mgmt., 876 F.2d at 1425 ("Indeed, there is
a general rule of property law that a deed made out to a
fictitious person is void, while a deed to a real person,
even if obtained by fraud, is only voidable."),
Ultra Dimensions is therefore distinguishable and
does not support the superiority of federal tax liens in this
Antioch Ministries could not and did not hold title to the
Jolings' properties when DOR filed its distraint
warrants, and DOR's tax liens became choate when the
warrants were recorded. Or. Rev. Stat. §§
the United States' Motion for Lien Priority Determination
(doc. 70) is DENIED, and lien priority shall be determined
according to the ...